Reflecting on 2017 Federal Policy Changes

The time certainly has flown by as we close the first year of the current political administration. In June, Astronology® reflected on the first six months on Capitol Hill in 2017. In this issue of Astronology®, we review current and potential future policy changes in four areas that affect Human Resources: the Fair Labor Standards Act exemption rules, NLRB seat changes, OSHA regulation rollbacks, and the Affordable Care Act.

Fair Labor Standards Act (FLSA) Exemption Rules Update
Around this time last year, many were preparing for possible changes to the FLSA to determine exempt and non-exempt roles moving forward. However, by the end of November 2016, an injunction was made on the Final Rule, halting its December 1st start date.

On August 31, 2017, U.S. District Court Judge Amos Mazzant granted summary judgement against the Overtime Final Rule. The US Department of Labor’s (DOL) website explains that “The court held that the Final Rule’s salary level exceeded the Department’s authority, and concluded that the Final Rule is invalid.”

What happens next? On October 31, 2017, on behalf of the DOL, the Department of Justice filed a notice to appeal the decision. The notice does not indicate what the US DOL’s motivations are or what practical arguments will be used. It is suggested that the DOL will

• Not defend the Obama selected $913 a week figure, and
• Argue that a salary test is legally permissible under the white-collar exemptions.

It’s likely we won’t hear much else until sometime in 2018. Stay tuned for future updates!

National Labor Relations Board (NLRB)
Many have kept their eyes peeled regarding nominations for and appointments to the National Labor Relations Board, which had a few seats left vacant in 2017. In January, the Trump administration appointed Philip Miscimarra as Chairman. In August, former GOP House staffer Marvin Kaplan was approved by the Senate to an open seat on the Board. The following month, William Emanuel was confirmed to the NLRB with a 49-47 Senate vote. Emanuel’s confirmation currently gives the Republicans a majority on the five member Board.

It is anticipated that with the newly adjusted Board there may be some reverse rulings in the future, namely the Joint-Employer ruling that gave franchisors responsibility for labor law violations committed by their franchisees. Other possible rollback rulings could include 2014 rulings that sped up union elections.

Phillip Miscimarra’s term expires on December 17, at which time he will not seek a second term. We look forward to learn what becomes of the vacated seat and position in 2018.

Occupational Safety & Health Administration (OSHA)
On July 20th the Department of Labor released an updated agenda indicating many OSHA regulatory actions would be cut. 469 proposed federal regulations are being removed. Another 391 regulations have been reclassified as “long-term” or “inactive” for further review. Some of the regulations being removed include efforts to regulate worker exposure to construction, noise, and combustible dust. Two regulations that are listed in the “long-term” category are regulations regarding emergency response & preparedness, and regulations regarding infectious diseases in the health care industry. There are also a few regulations in the “pre-rule” stage:

• Communication Tower Safety,
• Mechanical Power Presses Updated,
• Powered Industrial Trucks,
• Lock-Out/Tag-Out Update, and
• Blood Lead Level for Medical Removal.

We look forward to seeing what will happen with these proposed regulations.

Affordable Care Act (ACA)
In our June 27th Astronology® we described the then newly presented Better Care Reconciliation Act (BCRA). It was the Senate’s amendment to the House of Representatives’ American Health Care Act of 2017 (AHCA). The BCRA did not gain the needed votes to pass. In July, a third attempt, the “Skinny Repeal,” also failed to pass the Senate. Late September another attempt was dismissed. Republicans decided to not bring the Graham-Cassidy Plan to vote, as they believed they would not secure the needed votes.

What does this mean for us now? We should follow the currently mandated Affordable Care Act in order to avoid penalties. Nothing else has changed.

We eagerly wait for what 2018 brings the Human Resources sector! In addition, are there other federal or local regulations that have made an impact on you and your Human Resources role? Please let us know in the comment section below.

Freelance isn't Free Act

New York City Mayor Bill De Blasio signed the Freelance Isn’t Free Act (FIFA) back in November 2016. The law goes into effect May 15th, 2017. With an estimated four million freelancers in the New York City Metro area, the new law looks to rectify the payment challenges freelancers sometimes encounter. For instance, in 2014, the Freelancers Union discovered that 50% of reported freelancers had trouble collecting payments owed for their work. 81% of these freelancers experienced being paid late for their services, and 34% were not paid at all for some projects. Perhaps your organization currently employs freelance workers for various functions. If so, organizations that hire freelancers from the New York area, as well as organizations that function in the New York area, should take special note of this new law.

Temporary workers, contract workers, independent contractors, and freelance workers all fall into the growing category considered the “gig economy.” FIFA is considered one of the first attempts to deal with this segment of work, employment that covered just 10% of early 2005’s workforce. Ten years later, in late 2015, the gig economy encompassed 16% of the workforce. It is anticipated that this field will continue to grow and have a significant impact on employment in the coming years. To protect these freelance workers, FIFA creates a formal means for enforcement of freelancers’ labor rights. Highlighted features of the non-retroactive law include the following:

• A contract must be written if a business hires a freelancer for $800 or more worth of labor over a period of 120 days. The contract must include:
• The name and address of both parties
• Itemized list of all services provided with the value of each service
• Freelancer’s rate and method of compensation
• Specific date when the freelancer must be paid
• An understanding that the freelancer must be paid no later than 30 days from the completion of the work if no date is provided on the contract

• The hiring party is prohibited from “threatening, intimidating, disciplining, harassing, denying a work opportunity to, or discriminating against a freelance worker, or taking any other action that penalizes a freelance worker for, or is reasonably likely to deter a freelancer worker from, exercising or attempting to exercise any right guaranteed under the new law, or from obtaining future work opportunity because the freelance worker has done so.”

• If a freelancer succeeds in court with a claim, it is possible for the freelancer to recover
• Contracted value of the services,
• Double damages,
• Reasonable Attorney’s fees and costs,
• Injunctive relief,
• Statutory damages, and
• Other “such remedies as may be appropriate.”

• The city can take additional civil action against a hiring party that demonstrates “a pattern or practice of violations of the new law and seek up to $25,000 in civil penalties.”

An Entrepreneur online article written by Carol Roth suggests that organizations review current contracts and practices with respect to hiring independent contractors / freelancers, and to consult a lawyer with any concerns. The New York City Office of Labor Standards website also should be referenced for more details on FIFA and sample contracts for both freelancer workers & hiring organizations. Roth also noted that even if FIFA currently does not cover your organization, pay close attention that local, state, and / or federal definitions, such as in the Fair Labor Standards Act, do not define a hire you consider to be a freelance worker as an employee.

What has your organization done to prepare for the newly enacted Freelance Isn’t Free Act? If you’re not in the New York City area, what actions might you take in advance of potential future state or local legislation? We’d love to hear your thoughts in our comments section below!

The Fissured Workplace and Employee Misclassification

In recent times, companies such as Uber and Handy have been faced with lawsuits challenging whether the individuals working for them should truly be considered “contractors.” Are their “staff” in reality employees being denied rights reserved to those in the proper classification? In this issue of Astronology® we explore the fissured workplace and the accompanying issue of employee misclassification. How large of an issue is misclassifying employees? Is this part of larger concerns related to the fissured workplace?

What is the Fissured Workplace?
David Weil, an administrator for the United States Department of Labor’s Wage and Hour Division, popularized the term “fissured workplace” to describe the surge in employers’ use of contracted laborers. In 2014 Weil highlighted on the US Department of Labor’s blog what results from workplace fissuring: “The blurred lines from the fissured workplace make achieving compliance with the wage and hour laws we enforce a difficult task. Intense competition between business models like subcontracting, temporary agencies, labor brokers, franchising, licensing, and third-party management leads to low pay, and noncompliance pulls down standards for all – making it difficult for responsible employers to survive in low margin, fiercely competitive conditions. The costs in this race to be the lowest bidder are borne by workers deprived of their wages and their rights.” There’s a danger involved in a fissuring workplace: the danger of misclassification.

The Growth of Contracted Workers
But how many people actually are working in an independent contractor arrangement? To get a better understanding, economists Larry Katz and Alan Krueger replicated the 2005 Contingent Worker Survey in 2015. The results of the survey provide an estimate of how much labor is being contracted out by employers in the United States. The 2015 survey noted a jump from 10% in 2005 to 16% of workers in 2015 in “alternative arrangements,” working while not directly being an employee of an organization. Why the increase in outsourcing and contracting? In a Wall Street Journal online article, Anna Louie Sussman and Josh Zumbrun point to fissuring.

The Consequences of Misclassifying Workers in a Fissured Workplace
The Wage and Hour Division (WHD) website explains that although the department supports the proper use of independent contractors, there is a difference between legitimate independent contractors and misclassified employees. By classifying a worker as an independent contractor, an employer avoids expenses such as overtime pay, unemployment compensation tax, workers’ compensation insurance, and employee benefits such as sick pay & vacation. Such attempts to cut costs results in losses for everyone, however. Not only are employees cheated, but heavy fines from organizations found guilty of misclassification can add up to 41.5% of the contractor’s pay. Also of note is that these penalties can go as far back as three years. As a result, the WHD has worked with the IRS and many states to combat worker misclassifications. With 32 states cooperating in 2015, the WHD investigations resulted in more than $74 million in back wages for more than 102,000 workers in a variety of industries, including janitorial and hospitality.

“In general, independent contractors should comprise a small minority of most employers’ workforces,” states Jennifer Loftus, National Director for Astron Solutions. “Activities that are non-strategic in nature, and not the primary focus on the organization, are best candidates for outsourcing. When independent contractors or contract labor begin to comprise a noticeable and / or large portion of the workforce, the organization leaves the door open to lawsuits and investigations. When in doubt about workers’ proper classifications, check with outside legal counsel or other outside advisors. Proactive protection to the organization is advisable over negative consequences down the road.” Do you think fissuring workplaces will be curtailed as more misclassified employee cases come to light? Tell us your thoughts! We enjoy hearing from our Astronology® readers!